Suppose the State bank of Pakistan instructs its Trading Desk to purchase Pkr 5 billion of securities. Analyze the result of this transaction on the balance sheets of the State bank of Pakistan and commercial banks.

In simple words, the transaction given in the question will result different for state bank and commercial banks. Assuming the securities will be purchased from the commercial banks, the balance sheet of commercial banks will decrease assets and will increase their cash balance, thus, resulting in overall no change balance on assets side.

On the other hand, the state bank will add securities on the asset side of the balance sheet and will decrease cash balance.

due to the changes the federal reserve is making the unused reserves will impact the economy by them facing inflation. inflation is definfed as the increase in pricing of a good or service but the decline of the value of money used for purchasing those items. when the economy has a high inflation rate, they are subject to money loss and hurt on the economy.